Commission Regulation (EC) No 240/96 of 31 January 1996 on the application of Article 85 (3) of the Treaty to certain categories of technology transfer agreements.

This page is an extract of Art. 1 and 2 (the white clauses) and part of Art. 4 (two grey clauses).

Article 1
1. Pursuant to Article 85 (3) of the Treaty and subject to the conditions set out below, it is hereby declared that Article 85 (1) of the Treaty shall not apply to pure patent licensing or know-how licensing agreements and to mixed patent and know-how licensing agreements, including those agreements containing ancillary provisions relating to intellectual property rights other than patents, to which only two undertakings are party and which include one or more of the following obligations:

(1) an obligation on the licensor not to license other undertakings to exploit the licensed technology in the licensed territory;

(2) an obligation on the licensor not to exploit the licensed technology in the licensed territory himself;

(3) an obligation on the licensee not to exploit the licensed technology in the territory of the licensor within the common market;

(4) an obligation on the licensee not to manufacture or use the licensed product, or use the licensed process, in territories within the common market which are licensed to other licensees;

(5) an obligation on the licensee not to pursue an active policy of putting the licensed product on the market in the territories within the common market which are licensed to other licensees, and in particular not to engage in advertising specifically aimed at those territories or to establish any branch or maintain an distribution depot there;

(6) an obligation on the licensee not to put the licensed product on the market in the territories licensed to other licensees within the common market in response to unsolicited orders;

(7) an obligation on the licensee to use only the licensor's trademark or get up to distinguish the licensed product during the term of the agreement, provided that the licensee is not prevented from identifying himself as the manufacturer of the licensed products;

(8) an obligation on the licensee to limit his production of the licensed product to the quantities he requires in manufacturing his own products and to sell the licensed product only as an integral part of or a replacement part for his own products or otherwise in connection with the sale of his own products, provided that such quantities are freely determined by the licensee.

2. Where the agreement is a pure patent licensing agreement, the exemption of the obligations referred to in paragraph 1 is granted only to the extent that and for as long as the licensed product is protected by parallel patents, in the territories respectively of the licensee (points (1), (2), (7) and (8)), the licensor (point (3)) and other licensees (points (4) and (5). The exemption of the obligation referred to in point (6) of paragraph 1 is granted for a period not exceeding five years from the date when the licensed product is first put on the market within the common market by one of the licensees, to the extent that and for as long as, in these territories, this product is protected by parallel patents.

3. Where the agreement is a pure know-how licensing agreement, the period for which the exemption of the obligations referred to in points (1) to (5) of paragraph 1 is granted may not exceed ten years from the date when the licensed product is first put on the market within the common market by one of the licensees.

The exemption of the obligation referred to in point (6) of paragraph 1 is granted for a period not exceeding five years from the date when the licensed product is first put on the market within the common market by one of the licensees.

The obligations referred to in points (7) and (8) of paragraph 1 are exempted during the lifetime of the agreement for as long as the know-how remains secret and substantial.
However, the exemption in paragraph 1 shall apply only where the parties have identified in any appropriate form the initial know-how and any subsequent improvements to it which become available to one party and are communicated to the other party pursuant to the terms of the agreement and to the purpose thereof, and only for as long as the know-how remains secret and substantial.

4. Where the agreement is a mixed patent and know-how licensing agreement, the exemption of the obligations referred to in points (1) to (5) of paragraph 1 shall apply in Member States in which the licensed technology is protected by necessary patents for as long as the licensed product is protected in those Member States by such patents if the duration of such protection exceeds the periods specified in paragraph 3.

The duration of the exemption provided in point (6) of paragraph 1 may not exceed the five-year period provided for in paragraphs 2 and 3.

However, such agreements qualify for the exemption referred to in paragraph 1 only for as long as the patents remain in force or to the extent that the know-how is identified and for as long as it remains secret and substantial whichever period is the longer.

5. The exemption provided for in paragraph 1 shall also apply where in a particular agreement the parties undertake obligations of the types referred to in that paragraph but with a more limited scope than is permitted by that paragraph.


Article 2
1. Article 1 shall apply notwithstanding the presence in particular of any of the following clauses, which are generally not restrictive of competition:

(1) an obligation on the licensee not to divulge the know-how communicated by the licensor; the licensee may be held to this obligation after the agreement has expired;

(2) an obligation on the licensee not to grant sublicenses or assign the licence;

(3) an obligation on the licensee not to exploit the licensed know-how or patents after termination of the agreement in so far and as long as the know-how is still secret or the patents are still in force;

(4) an obligation on the licensee to grant to the licensor a licence in respect of his own improvements to or his new applications of the licensed technology, provided:
-that, in the case of severable improvements, such a licence is not exclusive, so that the licensee is free to use his own improvements or to license them to third parties, in so far as that does not involve disclosure of the know-how communicated by the licensor that is still secret,
- and that the licensor undertakes to grant an exclusive or non-exclusive licence of his own improvements to the licensee;

(5) an obligation on the licensee to observe minimum quality specifications, including technical specifications, for the licensed product or to procure goods or services from the licensor or from an undertaking designated by the licensor, in so far as these quality specifications, products or services are necessary for:
(a) a technically proper exploitation of the licensed technology; or
(b) ensuring that the product of the licensee conforms to the minimum quality specifications that are applicable to the licensor and other licensees; and to allow the licensor to carry out related checks;

(6) obligations:
(a) to inform the licensor of misappropriation of the know-how or of infringements of the licensed patents; or
(b) to take or to assist the licensor in taking legal action against such misappropriation or infringements;

(7) an obligation on the licensee to continue paying the royalties:
(a) until the end of the agreement in the amounts, for the periods and according to the methods freely determined by the parties, in the event of the know-how becoming publicly known other than by action of the licensor, without prejudice to the payment of any additional damages in the event of the know-how becoming publicly known by the action of the licensee in breach of the agreement;
(b) over a period going beyond the duration of the licensed patents, in order to facilitate payment;

(8) an obligation on the licensee to restrict his exploitation of the licensed technology to one or more technical fields of application covered by the licensed technology or to one or more product markets;

(9) an obligation on the licensee to pay a minimum royalty or to produce a minimum quantity of the licensed product or to carry out a minimum number of operations exploiting the licensed technology;

(10) an obligation on the licensor to grant the licensee any more favourable terms that the licensor may grant to another undertaking after the agreement is entered into;

(11) an obligation on the licensee to mark the licensed product with an indication of the licensor's name or of the licensed patent;

(12) an obligation on the licensee not to use the licensor's technology to construct facilities for third parties; this is without prejudice to the right of the licensee to increase the capacity of his facilities or to set up additional facilities for his own use on normal commercial terms, including the payment of additional royalties;

(13) an obligation on the licensee to supply only a limited quantity of the licensed product to a particular customer, where the licence was granted so that the customer might have a second source of supply inside the licensed territory; this provision shall also apply where the customer is the licensee, and the licence which was granted in order to provide a second source of supply provides that the customer is himself to manufacture the licensed products or to have them manufactured by a subcontractor;

(14) a reservation by the licensor of the right to exercise the rights conferred by a patent to oppose the exploitation of the technology by the licensee outside the licensed territory;

(15) a reservation by the licensor of the right to terminate the agreement if the licensee contests the secret or substantial nature of the licensed know-how or challenges the validity of licensed
patents within the common market belonging to the licensor or undertakings connected with him;

(16) a reservation by the licensor of the right to terminate the licence agreement of a patent if the licensee raises the claim that such a patent is not necessary;

(17) an obligation on the licensee to use his best endeavours to manufacture and market the licensed product;

(18) a reservation by the licensor of the right to terminate the exclusivity granted to the licensee and to stop licensing improvements to him when the licensee enters into competition within the common market with the licensor, with undertakings connected with the licensor or with other undertakings in respect of research and development, production, use or distribution of competing products, and to require the licensee to prove that the licensed know-how is not being used for the production of products and the provision of services other than those licensed.

2. In the event that, because of particular circumstances, the clauses referred to in paragraph 1 fall within the scope of Article 85 (1), they shall also be exempted even if they are not accompanied by any of the obligations exempted by Article 1.

3. The exemption in paragraph 2 shall also apply where an agreement contains clauses of the types referred to in paragraph 1 but with a more limited scope than is permitted by that paragraph.

GREY CLAUSES

Article 4 of 240/96 includes two clauses which are acceptable if notified :

Article 4
1. The exemption provided for in Articles 1 and 2 shall also apply to agreements containing obligations restrictive of competition which are not covered by those Articles and do not fall within the scope of Article 3, on condition that the agreements in question are notified to the Commission in accordance with the provisions of Articles 1, 2 and 3 of Regulation (EC) No 3385/94 and that the Commission does not oppose such exemption within a period of four months.

2. Paragraph 1 shall apply, in particular, where:

(a) the licensee is obliged at the time the agreement is entered into to accept quality specifications or further licences or to procure goods or services which are not necessary for a technically satisfactory exploitation of the licensed technology or for ensuring that the production of the licensee conforms to the quality standards that are respected by the licensor and other licensees;

(b) the licensee is prohibited from contesting the secrecy or the substantiality of the licensed know-how or from challenging the validity of patents licensed within the common market belonging to the licensor or undertakings connected with him.